The Roaring Nineties: Can Full Employment Be Sustained?
Edited by Alan B. Krueger and Robert Solow
During
the five years 1995 to 2000, the U.S. economy grew faster, maintained
a lower unemployment rate and generated less inflation than at any time
since the 1960s. With the subsequent slowdown in mind, were those five
years a one-time miracle or have the rules of the economic game changed?
Are there policy choices that could bring back that level of performance?
This book evaluates events of the 1990s from a dozen perspectives by
26 contributing economists, who provide a range of microeconomic and
macroeconomic views of the labor market and trends in productivity.
While the papers offer no unambiguous consensus, they agree on key elements:
- The annual growth rate of productivity rose suddenly from under 1.5 percent in the 25 years after 1970 to 2.5 percent in 1995-2000.
- The resulting increased investment fueled the economic expansion and prolonged the acceleration of productivity, a virtuous circle that can only endure temporarily.
- The terrorist attacks of September 11, 2001, and subsequent events accelerated a slowdown that was already underway.
Can the stellar performance of the Roaring '90s be sustained? The evidence so far is mixed. Since 2001, the labor market has weakened as much for college-educated workers as for less-educated workers, surprising most observers, and temporary worker employment has contracted drastically. Manufacturing has been particularly hard hit. Soaring budget deficits leave little hope that much will be done to develop workers' skills anytime soon. The longer-run future hinges in large part on whether productivity growth resumes the rapid pace of the 1990s or reverts to a slower pace, and whether responsible policies are put into effect.
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Alan B. Krueger (akrueger@princeton.edu) is the Bendheim Professor of Economics and Public Affairs at Princeton University and a research associate of the National Bureau of Economic Research.
Robert
M. Solow is Institute Professor Emeritus at the Massachusetts Institute
of Technology and a Nobel laureate in economics.
